Last week, INMA, the global newspaper (or newsmedia as they prefer) trade arm released its 2013 Outlook. The Outlook too, as all INMA’s publications do, has an intensely digital focus. Quite natural, when the print product is in free fall in the West, and more specifically in USA, where INMA is based.
But for those of us in India, where the print industry is still growing (now in single digits) and the digital transition seems still distant, INMA’s reports read like telegrams from the future. You know this is going to happen, but then you are comfortable today and there doesn’t look to be any crisis looming on the horizon, so you say to yourself “I wont even be here when this happens, so what the hell?”
On that note, let me list down the most interesting points from the INMA report. This is not an exhaustive summary, but merely a listing of what I found interesting.
INMA 2013 Outlook – what I found interesting!
(1) Preprints are expected to “fall off a cliff” in the coming years, because of online migration of consumer buying habits. Shawn Riegsecker, CEO of Centro, an online media buying agency, expects to “see a decline of as much as 30%” in preprints in ’14 and “an unabated decline in outlying years”.
My take : The implications of a decline in Preprints is profound. As I stated in an earlier blog post, US newspapers have become particularly reliant on Preprints with the evisceration of the Classifieds category. In Q1 2012, Preprints accounted for as much as 26% of overall US print newspaper advertising. Additionally Sunday, which today brings in 40-50% of the week’s revenue in most newspapers, is dependent hugely on the ‘triple whammy’ resulting from the Preprint insert. A sharp decline in Preprints can further exacerbate the troubles newspapers are mired in.
Newspapers are of course, aware of the move towards online coupons. They are fighting back through entities such as Wanderful Media, a preemptive strike by newspapers to ensure that even if the $5bn preprint advertising segment migrates to digital, it will be to the newspapers’s digital brands. Wanderful powers the coupon sections of newspaper websites in over 250 markets such as the Sacramento Bee, San Francisco Chronicle etc. Wanderful has been able to make this happen given that it has been founded by 12 newspaper companies including Hearst, EW Scripps, Cox Media, MediaNews, McClatchy, Washington Post etc.
(2) Competencies determine Products, and not vice versa. Do not see yourself as in the magazine or newspaper business, but being in the business of Storytelling and Communication. The Outlook quotes Jeff Bezos, “Base your strategy on things that don’t change.” and asks news companies to organize and lead companies around the key core competencies that wont change in the next 10 years.
My take : I found this a particularly powerful principle to generate strategy. It also reminded me (not similar though!) of the recent article Breaking News by Clayton Christensen + David Skok which looked at product creation through the lens of ‘jobs to be done’, another powerful framework to enable Product (creation) strategy.
(3) The printed newspaper is fast evolving into a luxury product, as evinced from the high price for home delivery, and the fact that the remnant print readers are now typically at the upper end of the income scale.
My take : Curiously enough, I encountered a similar argument in John Cassidy’s New Yorker blogpost. He says that WSJ and NYT “are increasingly aping the makers of other consumer goods, such as fashionable clothes and trendy gadgets: limiting free online access, pushing up their subscription prices, and generally trying to exploit the power of their brands to distinguish themselves from lesser competitors.” While he speaks specifically of WSJ and NYT, the same could be said of their counterparts in other US cities as well.
(4) The newspaper of the future will have a diversified revenue stream including advertising, copy sales + subscriptions, printing services income, transactional e-commerce, membership fees, brand extensions (cafes, conferences etc), equity plays + barters (Private Treaties) etc.
My take : For the newspaper of the future, Copy Sales + Subscriptions (online / offline) will possibly make up the bulk of the – roughly 40-50% Advertising, both print and digital, will make up anywhere from 25-33% of revenues. The rest will be split between such streams as contract printing, e-books, brand extensions, e-commerce, lead generation / affiliate links, membership fees etc. For an interesting list of ideas, see this post by Steve Buttry.
Don’t be surprised to see contract printing – A H Belo’s Dallas Morning News makes as much as 10% of its overall revenue through contract printing + distribution.
For examples of e-commerce by newspapers, we have the Telegraph UK and The Los Angeles Times in the US.
INMA’s News Audience Engagement Initiatives Report published earlier this year had a fascinating list of loyalty initiatives that combined brand-building with revenue monetization. Some of the examples included Aftonbladet’s Weight Club, Chicago Tribune’s TribNation conferences, Washington Post MasterClass, Winnipeg Free Press’s News Cafe etc.
(5) Newspapers are closed out of the search ad market, the biggest segment of online advertising. They are focused instead on display and classifieds, which have both seen a declining share of digital ad revenues. If they need to grow digital revenues at a faster clip than the present single digit rate, then they need to aggressively go after search.
My take : This is an important point, and accounts for the slower than anticipated growth in digital advertising for newspapers. Alan Mutter has also written on this in detail in a post on his Newsosaur Blog. In an interesting chart he compares how the overall US digital ad market moved from $4b in Q3’06 to $9b in Q3’12 (a CAGR of 14.5%) whereas Newspapers’ digital ad sales moved from $640m to only $760m in the same period (a CAGR of 3%!).
With search accounting for about 50% of the digital advertising pie, Newspapers are now getting aggressive about search advertising. The INMA Outlook illustrates this with an example about Digital First Media, where one of the key metrics they track (weekly) is “the percentage of digital campaigns that include search products as part of clients’ media buys”.
(6) The INMA Outlook argues that in order for Publishers to grow digital revenue, they have to go after search, which is the biggest category, as well as mobile and video, the fastest growing digital ad segments.
The INMA report highlights a tremendous advantage for newspapers when it comes to mobile. It cites a NYT study that says “smartphone / tablet readers are more likely to view established news brands as their leading source for news versus computer readers who tend to read web native news sites such as HuffPo, Drudge Report etc.”
My take : I found the preference for established news brands in the mobile environment fascinating. The advantage for established news brands could be on account of the fact that most news consumption in tablet / mobile environments could be through apps and when it comes to download of apps, familiarity of the brand could play a big role. Or maybe not, but certainly the preference that consumers have for well-known news brands when it comes to mobile / tablets, portends well for them when it comes to mobile advertising.
(7) “Indian publishers are investing heavily in brand and image building because they believe their markets must be emotionally vested. They don’t want to be in the same position as US publishers – armed with evidence that print works but unable to sell facts over perception. In fact, many believe it was under-investment in brand and image-building in US that created the ‘perceived bias’ impacting advertising sales today.”
My take : This is an interesting insight, and possibly true. However I do feel that in India, with the consolidation of Print amongst the big four, i.e., The Times of India Group, HT Media, Bhaskar Group and Jagran Prakashan, who amongst them account for over 60% of the print ad market and have also expanded into other media, have considerably more bargaining power than the US counterpart. So even without the brand advertising, they would still be able to succeed in the ad market.
Please note that the above is not an exhaustive summary of the INMA 2013 Outlook. It is merely a listing of the points I found interesting, and some that people working in Indian media will find relevant.
I encourage you to read the entire Outlook or at least the key takeaways.
This is my last post for 2012. In 2013, I hope to continue blogging every fortnight, sharing with you my thoughts on the print to digital transition, and what I see as the key developments along this journey. I look forward to having you along!
And on that note, let me wish all of you Happy Holidays, and a Great New Year ahead!